Business Entry Into Foreign Markets

International trade, multinational enterprises, and successful expansion through competitiveness have been major focuses for this module. It has been established that the success of a company that is going international is heavily dependent on a wide array of social, economical, political, and cultural factors, both internal and external. Even when all of the internal factors work for the company, such as a presence of an effective business plan, efficient internal policies, experienced management and motivated staff, a popular, well-advertize brand, which is backed up by a high-quality of a product or a service, the company’s efforts to expand into the global market can still be hindered and stopped in their tracks by strong competition from other MNEs or even local businesses, strict protectionist policies from the host country’s government, which attempt to protect their economy from being overwhelmed, or simply a business culture that enables approaches which the expanding business cannot compete with due to legal limitations in his native legislation (Ahmed & Zlate 2013). China and Japan are good examples of the latter problems, and many case studies about failed attempts at expansion into the foreign market have been based upon these countries, and the MNE’s inability to adapt to their cultures (Budde-Sung 2013; Japanese Business Culture n.d.)

Despite this, past history has showed that even the stereotypically impenetrable Japanese market can be entered, and with the right management, strategy formation and business plan for international expansion, companies can adapt to even to complicated conditions and achieve success. Procter & Gamble, for example, entered the Japanese market in 1973 by purchasing the Nippon Sunhome Company. Despite the perceived risky nature of the local market, by 1973, their goods became best sellers in the shops, promoting the “Procter & Gamble” brand and solidifying its place in the market.

In the following decades, P&G experiences a lot of rises and falls, going from 80 percent to 8 in the baby diapers industry, before once again winning over the Japanese market by adjusting its products to the demands of the nation.

One of the more promising companies to have entered the global market in the recent years is the Uber Technologies Inc. This company is an American transportation company that operates by providing a software platform that connects paying passengers with drivers who operate their own vehicles. The company was quickly defined as “disruptive” by various international media, due to its potential to compete with and even replace more traditional, niche businesses in the industry (in this case the Taxicab services). In several ways, Uber’s business approach is similar to that of Spreadshirt, as it wins the market by granting the user additional options of personal input into the service, and using modern technology to increase efficiency and comfort (Rugman & Collinson 2012).

The company is receiving continuous investments from major patrons, due to its proven competitive advantage in which it had shown in more than 66 countries worldwide.

A peculiar advantage of the service over other transportation companies is that it manages to operate outside of most of the existing regulations, due to the online nature of service and reliance on the fragmented idle resources in the labor market. And it achieved success by providing a better, more accessible service through the use of modern, widely accessible technologies, in this case smartphones by the means of an app (The Uber-all Economy: A Challenge to Traditional Business Models 2016).

Same as many other companies, Uber has attempted to enter the Japanese transportation services and car-hailing market and find a niche in it. In its initial year if offered its customers free rides as part of their initial advertising campaign, paid the drivers salaries itself, and attained wide public attention. However, the success did not last, since the Japanese government ruled that Uber’s use of drivers without a license for customer transportation was illegal.

Uber is currently negotiating with the Japanese government for a return to their market, and it is a widely known secret that Uber drivers are operating in Tokyo and other countries despite the prohibition. However, to successfully expand their service, the company would need to compete with the local e-hailing taxi service Hailo, the local taxis which have also incorporated apps into their business model, as well as Lyft, which, despite usually staying behind Uber on the US turf, is receiving a lot of support from both Chinese and Japanese investors (Who Are Uber’s Biggest Competitors? 2016). And to achieve this, they would need to develop an efficient business plan to increase their comparable competitiveness and integrate them into the industry as well as a thorough venture assessment, to evaluate the relevant risks and obstacles.

Currently, Uber’s main advantage over the competition is its high quality of transportation service at low costs, which comfortably puts them into in the price niche between the expensive taxis and the cheaper public transportation. The company’s business model concentrates on matching drivers with the customers through a mobile app. By conducting their service through an app, the company is able to improve their service by the means of a review system and by analyzing the data collected (Damodaran 2014).

Uber’s key partners in Japan are the drivers looking for work, map API service providers for the car location tracking functionalities, and payment processing institutions. Investors are also important, and Uber will need to win their attention to maintain its quality of service. Also, while in the other countries Uber could afford to delegate most of the customer interactions to the drivers, Japan is defined through its expectation of not only good service, but also a friendly and well-mannered communication culture, which means that Uber will need to set it as a standard for its partners to maintain the competitive edge. It is unlikely that this minor intervention will diminish the primary benefits the company offers to its drivers: the high amount of freedom and flexibility. The app makes payment and customer tracking very easy, while the company’s business model and laissez-faire management style allow for a flexible and adjustable work schedule.

Due to the current legislative problems which limit Uber’s legal activities within Japan, the company will probably need to negotiate the introduction of new legislations to regulate its activities, similarly to how it did in Washington and some other cities in the States and globally. This option is more beneficial than trying to fit Uber services into the taxi business model, as it leaves opportunity for beneficial rulings. Legal status is important, because while Uber has operated in gray areas of the law before, it severely limits its marketing ability, which is just as important as product development, management, and customer support.

The ability to assess the field and adjust the business strategy according to the needs and demands of the host country is critical to expanding operations to a new international market. While innovation and industry disruptiveness can serve as a solid foundation for successful business, a proper business plan is needed to achieve a marketable competitive advantage.

References

Ahmed, S & Zlate, A 2013, ‘Capital Flows to Emerging Market Economies: A Brave New World?’, Board of Governors of the Federal Reserve System, p. 1-14, viewed 20 June 2016.

Budde-Sung, A 2013, ‘The Invisible Meets the Intangible: Culture’s Impact on Intellectual Property Protection’, Journal of Business Ethics, vol. 117, no. 2, p. 345-359, viewed 10 June 2016.

Damodaran, A 2014, ‘A Disruptive Cab Ride to Riches: The Uber Payoff, Forbes.

Japanese Business Culture n.d.

Rugman, A. & Collinson, S 2012, International business, New York: Pearson.

The Uber-all Economy: A Challenge to Traditional Business Models 2016.

Who Are Uber’s Biggest Competitors? 2016.

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NerdyTom. 2021. "Business Entry Into Foreign Markets." October 29, 2021. https://nerdytom.com/business-entry-into-foreign-markets/.

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